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Andreessen Horowitz officially invests in real estate startup Flow

Venture capital firm Andreessen Horowitz has officially taken a stake in Flow, the real estate startup founded by WeWork’s Adam Neumann.

Cofounder and general partner at the venture capital firm, also known as a16z, Marc Andreessen confirmed the US$350 million investment in the platform that hopes to address a shortage of affordable homes across the US.

“Structural shortages in available homes for sale push housing prices higher, while young people are staying single for longer and increasingly concentrating in highly desirable urban centres,” Mr Andreessen said in a blog on the Andreessen Horowitz website.

“These factors put enormous pressure on rents in the nation’s most dynamic cities, starkly revealing the troubling realities of both sides of the housing market’s two historical models.

“The residential real estate world needs to address these changing dynamics. 

“And yet virtually no aspect of the modern housing market is ready for these changes.”

According to Mr Andreessen, demographic changes are at the heart of the issue faced by the broader US population, which has escalated because of Covid.

“Our country is creating households faster than we’re building houses,” he said.

“Now drop the impact of the post-Covid world into this. 

“Many people are voting with their feet and moving away from traditional economic hub cities to different cities, towns, or rural areas, with no diminishment of economic opportunity.”

Mr Andreessen said there are typically two situations that people find themselves in when it comes to housing.

“The first model is: you own a home you call your own, typically with a multi-decade mortgage, near your current employer,” he said.

“If you can find a house, as these locations often aren’t building new housing. 

“If you can afford that house, as housing prices in many such places have skyrocketed. 

“And even then, you’re now stuck — you can’t move, even if your economic opportunity or life path wants to take you somewhere else.”

Mr Andreessen said the second problem is that renting is often a soulless experience that leaves renters with no equity.

“Does it feel like home, or just a place to sleep?” he said.

“Are you proud to bring friends and family to visit, or hesitant? 

“And you can pay rent for decades and still own zero equity — nothing. 

“There’s a reason the federal government started subsidising home mortgages: someone who has bought in to where he lives cares more about where he lives. 

“Without this, apartments don’t generate any bond between person and place and without community, no bond between person to person.”

Mr Andreessen said Flow will help address some of these issues, by renting out the real estate portfolio Mr Neumann acquired over the past two years, which is reportedly worth $1 billion, according to the Wall Street Journal.

Mr Neumann’s portfolio consists of approximately 4000 apartments across the Sun Belt, including hotspots like Miami and Fort Lauderdale.

“Adam is a visionary leader who revolutionised the second largest asset class in the world — commercial real estate — by bringing community and brand to an industry in which neither existed before,” Mr Andreessen said.

“We think it is natural that for his first venture since WeWork, Adam returns to the theme of connecting people through transforming their physical spaces and building communities where people spend the most time: their homes. 

“Residential real estate — the world’s largest asset class — is ready for exactly this change.”

Flow will look to tackle housing inequality according to Mr Andreessen.

“Shelter is one of our most basic needs,” he said.

“In a world where limited access to home ownership continues to be a driving force behind inequality and anxiety, giving renters a sense of security, community, and genuine ownership has transformative power for our society. 

“When you care for people at their home and provide them with a sense of physical and financial security, you empower them to do more and build things. 

“Solving this problem is key to increasing opportunity for everyone.”

Mr Andreessen said he understands that there will be a lot of “heavy lifting” ahead to tackle the housing issues across the US.

“We are thrilled by the scope and aspiration of this project,” he said.

“It is not lacking in vision or ambition, but only projects with such lofty goals have a chance at changing the world.”

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Rowan Crosby

Rowan Crosby is a freelance journalist specialising in finance and real estate.